With the radical overhaul of Medicare in limbo, one of the program’s most popular features, Medicare Advantage, is coming under renewed assault.
An alternative to traditional Medicare Parts A and B, Medicare Advantage allows seniors to choose among plans offered by private insurers. By law, the plans must charge all enrollees the same premium, but Medicare pays the insurer an additional sum, depending on the enrollee’s expected costs. Currently, over 26.4 million people, or more than one-third of seniors, are enrolled in MA plans.
But a recent two-part blog by two physicians from the policy world who served in the Obama administration is highly critical of the MA business model. In posts in the Health Affairs Blog on September 29 and 30, Richard Gilfillan, M.D. and Donald Berwick, M.D. decried what they say is a disturbing “epidemic” of investments flowing from private equity and venture capital firms and other investors into companies focused on Medicare Advantage.
“The MA program is fundamentally flawed. Most sensible business-minded large employers in America do not give an insurer all their health care money upfront,” they write.
Media Picks up the Message
The blogs, provocatively titled “Medicare Advantage, Direct Contracting and the Medicare ‘Money Machine,’ Part 1: The Risk-Score Game” and “Medicare Advantage, Direct Contracting, and the Medicare ‘Money Machine,’ Part 2: Building on the ACO Model” direct most of their fire on Direct Contracting Models and MA’s risk-adjusted premiums.
Direct Contracting Models are a Trump-era experimental policy in which currently 53 Direct Contracting Entities participate with CMS in developing approaches to reduce expenditures and maintain or enhance the quality of care for beneficiaries in Medicate fee-for-service (FFS), also known as Original Medicare.
MA’s risk-adjusted premiums are a practice, in which an enrollee’s premium is based on the senior’s expected health care costs, with enrollees with higher rates of comorbidities paying higher premiums but receiving care aligned with their special needs.
A Google search of “Medicare Advantage pros and cons” features articles from mainstream news organizations critical of MA. “These popular plans may carry hidden risk,” wrote Consumer Reports on October 14. “Advantage plans are financially risky for patients with health issues,” wrote the Wall Street Journal on October 17.
Privatization of Medicare?
To Gilfillan and Berwick, Direct Contracting can lead to the “privatization of Medicare” while MA’s risk-adjusted premiums provide an incentive for some health care plans to game the system through manipulation of the mechanisms by which the premiums are determined.
MA proponents were quick to respond to the attack. On the supposed ills of Medicare Direct Contracting, “their argument completely skips over a major reality, which is that many of the most significant innovations in terms of care management in Medicare are taking place inside Medicare Advantage plans. Indeed, if it weren’t for MA, there would at this point be very little innovation at scale inside the Medicare program,” wrote Mark Hagland, in hcinnovationgroup.comon October 4.
In his book, New Way to Care: Social Protections that Put Families First, John C. Goodman, the president of The Goodman Institute and the co-publisher of Health Care News, concurs.
“In the opinion of health economists who have looked at the subject seriously, the most innovative and successful attempts to lower cost, raise quality, and improve access in the country are found in Medicare Advantage plans – particularly those run by independent doctor associations, managed by entrepreneurs,” Goodman wrote. “Probably the worst-run insurance plan in the entire country is conventional Medicare, which on any given day is setting about 6 billion prices – without any regard to supply-and-demand conditions and (for the most part) without any regard for how its administered prices affect quality of care or access to care.”
Cuts Costs, Avoids Fraud
Beverly Gossage is an independent, licensed health insurance agent certified to write Medicare plans. She also serves as a Republican State Senator in Kansas, representing District 9.
“After reviewing and researching the differences and doing the math on potential costs in a healthy year and a catastrophic scenario, most of my clients prefer a Medicare Advantage plan where they save more of their own money paying small copays for services as they go,” Gossage tells Health Care News. “They like to profit in the healthy years, knowing that there is an out-of-pocket maximum for medical services in an unhealthy year.”
Gossage says there are two critical points in the MA debate. The first deals with reducing the risk to the funding pools for traditional Medicare Part A, and Part B.
“When a Medicare beneficiary suffers a stroke, how much does this cost original Medicare? When a beneficiary with a Medicare Advantage plan suffers a stroke, the federal government has shed a claim to a private insurance company, thus saving taxpayers potentially hundreds of thousands of dollars,” said Gossage. “The insurance company, meanwhile, gets its $1,000 or so per month they would also get for a perfectly healthy beneficiary.
The second critical point is reducing Medicare fraud. “When was the last time you heard that private Medicare Advantage insurers have a $50B+ fraud tag? Never. Yet we hear this annually about original Medicare with bad actors slipping through the cracks of the federal government bureaucracy undetected,” said Gossage.
Bonner R. Cohen, Ph.D., (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.